U.S. stocks drop sharply on ‘cliff’ concerns

Israeli air strike kills Hamas leader; price of crude spikes 1.1%

By

KateGibson

NEW YORK (MarketWatch) — U.S. stock indexes fell to multi-month lows Wednesday on worries about the U.S. “fiscal cliff” and after an Israeli strike in the Gaza Strip increased Wall Street’s anxiety, offsetting gains in the tech sector.

Reuters

U.S. President Barack Obama discussed the fiscal cliff at his press conference Thursday. See live blog.

The budget negotiations to avert more than $600 billion in automatic spending cuts and tax hikes from starting in January is “a global economic event, and the eye of the storm is Washington,” said Jim Russell, chief equity strategist for U.S. Bank Wealth Management.

“There is increasing activity between Israel and several other Middle East countries, which is taking oil higher and making markets more jittery, and adding to the markets’ downside volatility,” said Russell.

After rising 41 points and falling 213 points, the Dow Jones Industrial Average
DJIA, -0.05%
closed at 12,570.95, down 185.23 points, or 1.5%. The third day of declines left the index at its lowest close since late June.

Also finishing at a more-than-four-month low, The S&P 500 Index
SPX, +0.01%
shed 19.04 points, or 1.4%, to 1,355.49, with industrials hardest hit of its 10 major sectors, all of which ended in the red.

Down more than 10% from its September closing high, putting it in correction territory, the Nasdaq Composite
COMP, +0.15%
fell 37.08 points, 1.3%, to 2,846.81, its lowest close in five months.

For every stock that rose more than eight fell on the New York Stock Exchange, where 830 million shares traded. Composite volume cleared 4 billion.

Oil rises

The price of oil jumped more than 1% after an Israeli airstrike killed a Hamas leader in the Gaza Strip, fostering the view that Middle East unrest would dent supply.

Crude futures
CLZ2, -0.58%
for December delivery gained 94 cents, or 1.1%, to $86.32 a barrel on the New York Mercantile Exchange.

In Washington, President Barack Obama is to begin negotiating a budget deal with Congress to prevent more than $600 billion in automatic tax hikes and spending reductions slated to begin in January.

The president on Wednesday met with corporate executives including Jeffrey Immelt, chief executive of General Electric Co.
GE, -0.72%
and took questions at an afternoon news conference, his first since June.

Obama started the news conference by repeating his request that Congress quickly pass an extension of the Bush-era tax cuts for Americans making less than $200,000 and couples that earn less than $250,000 a year.

“We should at least do what we agree on,” said Obama, who plans to start negotiations with Democratic and Republican congressional leaders on Friday.

“The markets would react positively if we got some deal, even an extension, but how positively will depend on whether we get serious reform. We could get a nice little pop, but if you want more than that, we need a deal that has some teeth,” said Skrainka.

“Every investor now is a cliff watcher. The focus here is not on earnings, the Federal Reserve or oil prices; it’s all about the fiscal cliff,” said Alan Skrainka, chief investment officer at Cornerstone Wealth Management in Des Peres, Mo.

Non-cliff notes

Minutes from the last Federal Open Market Committee gathering show a number of Federal Reserve officials thought the central bank might have to broaden its monthly bond purchases in 2013.

“Our base case scenario is for $20-to-$30 billion in extra purchases starting in the new year. Most economists expect something additional to be announced so this headline is not new news,” said Dan Greenhaus, chief global strategist at BTIG LLC.

Intraday Data provided by SIX Financial Information and subject to terms of use.
Historical and current end-of-day data provided by SIX Financial Information.
All quotes are in local exchange time. Real-time last sale data for U.S. stock quotes reflect trades reported through Nasdaq only.
Intraday data delayed at least 15 minutes or per exchange requirements.